London house prices up 5%, official figures show

The ONS says house prices in London and the South-East are still rising while
the influential RICS study suggests the market may be "over the very worst”.

House prices continued to rise in 2012, official figures showed today, driven
largely by demand for property in London and the South-East of England.

Despite a return to recession for the economy last year, UK house prices
increased by 2.1pc to £232,000 in the year to November, up from 1.5pc in
October.

But the figures, published by the Office for National Statistics, showed
steeper increases in the capital, where prices were up 5pc to £393,000, and
the South-East, which registered a 3pc increase.

The ONS survey also reflected a weaker increase in Wales, up 0.8pc, and
declines of 1.1pc in Scotland and 8.5pc in Northern Ireland.

It also suggested affordability continuned to worsen for those trying to get
on the property ladder. Prices paid by first-time buyers were 2.7pc higher
compared to 1.9pc for existing owners who had moved.

Economists said the prospects for the property market remained tough for 2013
with unemployment remaining stubbornly high and with limited growth in wages
expected. But central bank attempts to cut mortgage rates could help prop up
demand.

Howard Archer, economist at IHS Global Insight, said: "Some support for
house prices should come from recent decent employment growth and likely
extended low interest rates, while mortgages appear to be becoming
increasingly available helped by the “Funding for Lending” scheme launched
at the start of August by the Bank of England."

A sharp increase in foreign buyers has been cited for the continuing health of
London's property market. This was initially due to the global super-rich
seeking protection from global financial uncertainty and tax rises - agents
are reporting an influx of French buyers - but more recently agents suggest
middle class Chinese buyers with children coming to study in London have
been buying property.

It emerged yesterday that investors have rushed in to reserve luxury homes
planned for the revamped Battersea Power Station in south-west London, with
600 of the 800 properties already claimed after just five days on the
market. River-facing penthouses carry an asking price of more than £6m.

The ONS figures have a two-month between when data is gathered and published.
A monthly report by Nationwide building society has since suggested average
prices dropped by 1pc for the full year in 2012. Economists today were more
focused on a monthly report by the Royal Institution of Chartered Surveyors
(RICS) which is based on more recent data.

12-month house price changes. Source: ONS

It showed its most positive reading since 2010 with the organisation
suggesting the market may be "over the very worst" . A balance of
24pc more surveyors predicted that the number of house sales will increase
over the next three months, compared to those expecting transactions to
fall.

The poll of 280 surveyors also showed that property prices held steady in
December, marking the first time since mid-2010 that surveyors did not
report that prices edged downwards over the previous three months.

Accordingly, the survey showed that for the first time in two and a half years
surveyors did not predict further property price drops over the coming three
months.

“This more positive outlook comes at a time when confidence has been growing
that the market in some parts of the country may now be over the very
worst,” said RICS.

The organisation is forecasting that prices will rise by 2pc this coming year.

Peter Bolton King, global residential director at RICS, said: “As we start the
new year confidence to the housing market does appear to be improving,
helped in part by the impact of the Funding for Leading Scheme. Indeed, our
members are predicting that transaction levels will continue increasing in
many parts of the country.

“That said, more still needs to be done to ensure potential buyers can access
the market at every level.”

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